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The Central Board of Revenue (CBR) will brief the International Monetary Fund (IMF) about the latest developments on the sales tax and income tax audit systems, strategy to meet revenue target in 2006-2007 and implementation of the tax administration reforms in Pakistan.
Official sources told Business Recorder on Friday that an IMF technical mission would review the taxation system under (Article IV Consultation) in collaboration with the CBR from August 21-24. The IMF team comprises Flecher, Ms Hakura, Cosse, Savastano, Lorie, Bartsch and Moriyama.
The mission will meet CBR Chairman Abdullah Yusuf and his team to discuss the tax-wise performance under the ongoing reform process. Meetings with the CBR members would also be convened from August 21-23, while concluding meeting would be held with the CBR Chairman on August 24.
The technical mission and the tax authorities would review the performance for the last three financial years. The revenue collection for 2004-2005, 2005-2006 and tax projections for 2006-2007 would be discussed threadbare during the meetings.
The mission would also have firsthand knowledge about the assessment of tax measures in budget 2006-2007. Total taxation measures projected for 2006-2007 amounted to Rs 25.1 billion. The relief measures would cost CBR Rs 16.7 billion. The net additional revenue from changes made in the budget 2006-2007 would be around Rs 8.4 billion. The government would suffer revenue loss of Rs 6.7 billion due to change in customs duty structure. The relief on the sales tax side would cost Rs 1.2 billion and relief measures on the income tax side would cost Rs 8.8 billion.
The mission would also review the current pace of revenue collection and strategy to meet the target of Rs 835 billion set for 2006-2007. The board will also brief the IMF on the tax-wise performance including general sales tax (GST), federal excise duty (FED), customs duty and income tax.
The CBR will give IMF an overview of annual growth in the tax-GDP ratio on account of ongoing reforms. Tax Administration Reform Plan (TARP) and progress made on this front will also be on the agenda.
The board will seek technical help from the IMF wherever needed for increasing tax-GDP ratio taking into account economic indicators like growth, investment, expenditure and fiscal deficit, sources said. Sources said that the Ministry of Finance and CBR mutually set the revenue collection target without any direct input from the IMF. However, the fund mission will continue its consultative role in structural adjustment after periodic review of the economy. The CBR is not legally bound to consult IMF in fixing revenue target as the country is out of the Poverty Reduction Growth Facility (PRGF) programme and is not taking any financial assistance from the fund.
Sources said that even if Pakistan is out of the PRGF programme, the role of IMF in third world countries could not be overruled, reason being, World Bank (WB) gives due weightage to the reports of IMF before extending any loan to a country. The reform process in Pakistan will continue till 2008 with financial assistance of the World Bank and DFID.
Moreover, the role of IMF could be of 'rating agency' evaluating country's performance for the WB and other donor agencies. It monitors the income and expenditure of member countries to check the level of inflation, which also directly or indirectly affects other countries, sources added.

Copyright Business Recorder, 2006

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